Frederick’s of Hollywood Group Inc., known for its racy women’s lingerie, filed for bankruptcy after closing all its stores and reaching a deal to sell the company as an online-only venture to Authentic Brands Group LLC.
The Los Angeles-based company notified customers on its website that it had closed all its brick-and-mortar locations. The company listed $36.5 million in assets and $106 million in debt in Chapter 11 papers filed Sunday in U.S. bankruptcy court in Wilmington, Delaware.
Frederick’s reached an agreement with Authentic Brands to sell its e-commerce operations, inventory and intellectual property for $22.5 million in cash and 25 percent of future brand revenue, according to court filings. The company will run a court-authorized sale process and hold an auction if other offers surface.
Last year, Frederick’s was taken private for about $24.8 million by investors led by a unit of New York-based Harbinger Group Inc., according to a statement. Harbinger wrote off $60.2 million in goodwill impairment related to Frederick’s in a February regulatory filing.
At the time of the Harbinger deal, Frederick’s had 94 women’s clothing stores. At its height it had more than 200.
Frederick’s will seek permission to obtain $11 million in bankruptcy financing from current lender Salus Capital Partners LLC, according to court documents. The Needham, Massachusetts-based lender, an affiliate of Harbinger, is owed about $33 million in secured debt.
Harbinger also holds more than $16 million in unsecured notes and more than $10 million of Frederick’s almost $57 million in unsecured trade debt.
Frederick’s, founded in 1947, paved the way for companies like L Brands Inc.’s Victoria’s Secret, introducing U.S. women to push-up bras and thong underwear, according to its website.
The company previously sought bankruptcy protection in July 2000 and received court approval of its exit plan in December 2002, according to court documents.
The past two years have seen a number of women’s clothing retailers head into bankruptcy, including Loehmann’s, Dots and Delia’s. Like them, Frederick’s fell prey to a slowdown in mall traffic and the growth in online shopping.
“Increased competition from other apparel retailers and brands” and dwindling mall traffic led to nearly a decade of slumping financial performance, Chief Operating Officer William Soncini, said in court documents.
Frederick’s has racked up more than $165 million in losses since 2008 as its sales steadily declined year after year, as customers favored competitors or cut back on spending, according to court filings.
The case is In re Frederick’s of Hollywood Group Inc., 15-10837, U.S. Bankruptcy Court, District of Delaware (Wilmington).